London Property Market: Heating Up or Cooling Off?
The London property market has become particularly lucrative in recent years, which is great news for anyone who currently owns a house or flat in Britain’s capital. The high prices in London have forced many young professionals to share flats until they are well into their 30s and 40s, and those wishing to start families have been driven into the outlying suburbs. However, the rise in prices appeared to have slowed slightly within the last two months with Aprils 1.2 percent rise slowing to a 0.7 percent rise in May.
The London Housing Bubble
According to Nationwide, the UK’s largest building society, property prices in London have risen by 18 percent over the last year and average prices are now 5.3 percent up on the start of the year, meaning that they are 20 percent higher than peak prices before the financial crisis. The inflated price of London homes means that those who rent in London are finding it very tough to get their foot on the property ladder. However, it isn’t all bad news. Private landlords and foreign investors have benefited greatly from the increase in property prices in Britain’s capital. The high prices also mean that those who already own homes in London will be able to sell for a very large amount of money. The process of selling a property in London will also be significantly quicker than elsewhere in the UK, as houses and flats on the market get snapped up quickly by eager buyers. Some firms, like House Buyer Bureau, even provide fast sale services specifically targeted at the London market.
Signs of Moderation
Nationwide has remarked that activity in the London housing market has begun to slow down, partly as a result of new mortgage lending rules that were officially introduced in April. The new system was created to prevent a return to the kind of mortgage lending that was occurring before the financial crisis, and involves a full affordability check on mortgage applicants. It is meant to ensure that people are not taking on mortgages that they cannot hope to keep up repayments on. Demand from first-time buyers is playing a pivotal role in the housing market, and due to stricter checks on applicants, the number of successful applications has declined in the high-priced capital. The governments Help to Buy scheme was not a particular success in London, as the majority of the loans have been used to purchase lower value properties.
What Happens Next?
The UK has been called on to raise taxes on high value properties, adjust the Help to Buy scheme and build more houses by the European Commission. This is due to the London property bubble and the fact that the average UK property price is now 186,512, the highest figure ever recorded. Prices are still rising in London, but not quite as steeply as in April. This can only be good news for buyers, particularly those with families.